Accounting / July 27, 2018 / Pearl Bailey
Working Capital Cycle or popularly known as operating cycle, is the length of time between the outflow and inflow of cash during the business operation. It is the time taken by the firm, for the payment of materials, wages and other expenses, entering into stock and realizing cash from the sale of the finished good.
Reconciling accounts and comparing transactions also helps your accountants produce reliable, accurate, and high-quality financial statements. Since your company balance sheet reflects all money spent—whether cash, credit, or loans—and all assets purchased with those funds, the accuracy of the balance sheet strongly depends on the accurate reconciliation of your company's financial accounts.
Activity based costing (ABC) assigns manufacturing overhead costs to products in a more logical manner than the traditional approach of simply allocating costs on the basis of machine hours. Activity based costing first assigns costs to the activities that are the real cause of the overhead. It then assigns the cost of those activities only to the products that are actually demanding the activities.
You, as the owner of your business, have the task of determining the right amount to invest in each of your asset accounts. You do that by comparing your firm to other companies in your industry and see how much they have invested in asset accounts. You also keep track of how much you have invested in your asset accounts from year to year and see what works.
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